South Africa's Electricity Price Hikes Are a Regressive Tax on the Poor: The Burden Ledger

A new report from GroundUp documents that South African electricity tariffs have risen roughly six times faster than inflation since 2007, leaving millions unable to afford power this winter.^[1] Municipal customers face an average 9% increase, on top of an earlier Eskom hike. Shelton Damon, a casual worker, told GroundUp that R50 now buys only 18 units of electricity, down from 50 units a few years ago.^[1] Families are returning to candles and paraffin stoves, fire hazards that spark deadly fires in informal settlements.^[1]

This is not a story about inflation. It is a story about a regressive tariff structure that makes the poorest pay the highest share of their income for an essential service. Independent research, including ACEEE data in the United States, shows that low-income households spend roughly three times the share of their income on energy compared to higher-income households. In South Africa, with a poverty line of R1,109 per month (about $60 USD), a 9% tariff increase means a household near that line must divert an additional R100 (about $5.40 USD) from food or medicine just to keep the lights on. The burden is arithmetic: every flat percentage increase hits the poorest hardest.

The mechanism at work is a utility cost-recovery model that treats electricity as a commodity rather than an essential public good. Eskom and municipal utilities pass through cost increases, including the cost of uncollectible debt from those who cannot pay, onto all ratepayers. But the poorest customers, who cannot afford the increases, fall further behind, creating a cycle of arrears, disconnection, and even higher uncollectibles. The utility pays record dividends or debt service while households self-disconnect by going without power to avoid a formal shutoff.

The concrete alternative is a percentage-of-income payment plan (PIPP), which caps a low-income household's utility bill at a fixed share of income, typically 3 to 6% for combined heat and electric, with the difference covered by a rider on all customers or by dedicated assistance funds. Such programs exist in Ohio, Pennsylvania, New Jersey, and Colorado, and they convert energy from a shutoff risk into a budgetable fixed expense. South Africa's National Energy Regulator and the Department of Mineral Resources and Energy should mandate a PIPP for all low-income households, paired with arrearage forgiveness that retires old debt as on-time payments are made. The funding can come from a small surcharge on all electricity sales, as is done in many U.S. states, or from the fiscus via a reformed LIHEAP-style block grant.

The burden ledger is clear: without a PIPP, the price hikes will continue to push families into the dark. The question is whether South Africa's regulators and utilities will treat electricity as a public good or as a profit center. The answer is written in the percentage of income that the poorest pay, and in the candles they burn when the power goes out.